Prediction Risk and Estimation Risk of the Ridgeless Least Squares Estimator under General Assumptions on Regression Errors

Abstract: In recent years, there has been a significant growth in research focusing on minimum $\ell_2$ norm (ridgeless) interpolation least squares estimators. However, the majority of these analyses have been limited to an unrealistic regression error structure, assuming independent and identically distributed errors with zero mean and common variance. In this paper, we explore prediction risk as well as estimation risk under more general regression error assumptions, highlighting the benefits of overparameterization in a more realistic setting that allows for clustered or serial dependence. Notably, we establish that the estimation difficulties associated with the variance components of both risks can be summarized through the trace of the variance-covariance matrix of the regression errors. Our findings suggest that the benefits of overparameterization can extend to time series, panel and grouped data.